Previous research has shown that, despite the low-income levels in developing countries, cost recovery is a prerequisite for sustainability of urban water services. The challenge for service improvement is continually growing, as it is projected that 88% of the increase in global population will live in urban centres of low-income countries by the year 2015. Yet bill collection efficiency in some African urban water utilities is lower than 50%. In order to improve cost recovery levels, the new public managerialism paradigm suggests that water utility managers need to change their business philosophy from being supply-driven to engendering customer focus. This study used empirical data, obtained through a cross-sectional survey in 11 major towns in Uganda to establish customer perceptions that influence bill payment behaviour of water utility customers. Regression analysis of data obtained showed that service value and customer satisfaction contribute about 20% of the variation in customer loyalty, which in turn significantly influences bill payment behaviour. Therefore, in order to improve cost recovery, utility managers have to work towards improving customer satisfaction and perceived value of the services delivered. The effect of corporate image, of significance in high-income countries, was not found to be relevant in Uganda.